clro-20230930.htm
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

Form 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period _______ to _______

 

Commission file number:001-33660

CLEARONE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

87-0398877

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. employer identification number)

 

 

 

5225 Wiley Post Way, Suite 500, Salt Lake City, Utah

 

84116

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (801) 975-7200

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

  

Trading Symbol(s)

  

Name of each exchange on which registered

Common Stock, $0.001

 

CLRO

 

The NASDAQ Capital Market

 

Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  No 

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Larger Accelerated Filer

Accelerated Filer  

Non-Accelerated Filer

Smaller Reporting Company

 

Emerging Growth Company  


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes No


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

The number of shares of ClearOne common stock outstanding as of November 7, 2023 was 23,960,684


 CLEARONE, INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2023

 

INDEX




PART I - FINANCIAL INFORMATION



Item 1. Financial Statements 3




Unaudited Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 3




Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022 4




Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022 5




Unaudited Notes to Condensed Consolidated Financial Statements 7



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 19



Item 3. Quantitative and Qualitative Disclosures About Market Risk 26



Item 4. Controls and Procedures 26




PART II - OTHER INFORMATION



Item 1. Legal Proceedings 27



Item 1A. Risk Factors 27



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 27



Item 3. Defaults Upon Senior Securities 27



Item 4. Mine Safety Disclosures 27



Item 5. Other Information 27



Item 6. Exhibits 28

 

 

 

  

CLEARONE, INC

(Dollars in thousands, except par value)

 

 

 

September 30, 2023

 

 

December 31, 2022

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,694

 

 

$

984

 

Current marketable securities

5,698



Legal settlement receivable




55,000

Receivables, net of allowance of $326

 

 

3,874

 

 

 

3,603

 

Inventories, net

 

 

8,664

 

 

 

8,961

 

Income tax receivable

6,381


1,071

Prepaid expenses and other assets

 

 

3,776

 

 

 

7,808

 

Total current assets

 

 

42,087

 

 

 

77,427

 

Long-term marketable securities

583



Long-term inventories, net

 

 

2,870

 

 

 

2,707

 

Property and equipment, net

 

 

590

 

 

 

383

 

Operating lease - right of use assets, net

 

 

1,081

 

 

 

1,047

 

Intangibles, net

 

 

1,794

 

 

 

2,071

 

Other assets

 

 

112

 

 

 

115

 

Total assets

 

$

49,117

 

 

$

83,750

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,759

 

 

$

1,284

 

Accrued liabilities

 

 

2,340

 

 

 

3,041

 

Deferred product revenue

 

 

38

 

 

 

63

 

Short-term debt

1,204


3,732

Total current liabilities

 

 

5,341

 

 

 

8,120

 

Operating lease liability, net of current

 

 

755

 

 

 

492

 

Other long-term liabilities

 

 

1,008

 

 

 

1,008

 

Total liabilities

 

 

7,104

 

 

 

9,620

 

 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Common stock, par value $0.001, 50,000,000 shares authorized, 23,960,684 and  23,955,767 shares issued and outstanding, respectively

 

 

24

 

 

 

24

 

Additional paid-in capital

 

 

46,015

 

 

 

74,910

 

Accumulated other comprehensive loss

 

 

(308

)

 

 

(288

)

Accumulated deficit

 

 

(3,718

)

 

 

(516

)

Total shareholders' equity

 

 

42,013

 

 

 

74,130

 

Total liabilities and shareholders' equity

 

$

49,117

 

 

$

83,750

 

 

See accompanying notes

 

 

CLEARONE, INC.

COMPREHENSIVE LOSS

(Dollars in thousands, except per share amounts)

 

 

 

Three months ended September 30,

 


Nine months ended September 30,

 

 

2023

 

 

2022

 


2023


2022

Revenue

 

$

4,889

 

 

$

6,264

 


$ 14,550

$ 21,184

Cost of goods sold 

 

 

3,273

 

 

 

3,694

 



9,771


12,991

Gross profit

 

 

1,616

 

 

 

2,570

 



4,779


8,193

 

 

 

 

 

 

 

 

 









Operating expenses:

 

 

 

 

 

 

 

 









Sales and marketing

 

 

1,119

 

 

 

1,151

 



3,634


4,273

Research and product development

 

 

889

 

 

 

876

 



2,805



3,406

General and administrative

 

 

1,097

 

 

 

1,673

 



3,373



5,146

Total operating expenses

 

 

3,105

 

 

 

3,700

 



9,812


12,825

 

 

 

 

 

 

 

 

 









Operating loss

 

 

(1,489

)

 

 

(1,130

)



(5,033 )

(4,632
)

 

 

 

 

 

 

 

 

 









Interest expense

(86)

(90 )

(469 )

(285 )

Other income (loss), net

 

 

243

 

 

(3

)

2,346


1,505

 

 

 

 

 

 

 

 

 









Loss before income taxes

 

 

(1,332

)

 

 

(1,223

)

(3,156 )

(3,412 )

 

 

 

 

 

 

 

 

 









Provision for income taxes

 

 

19

 

 

 

25

 



46


60

 

 

 

 

 

 

 

 

 









Net loss

 

$

(1,351

)

 

$

(1,248

)
$ (3,202 ) $ (3,472 )

 

 

 

 

 

 

 

 

 









Basic weighted average shares outstanding

 

 

23,960,313

 

 

 

23,952,555

 



23,957,311


23,933,033

Diluted weighted average shares outstanding

 

 

23,960,313

 

 

 

23,952,555

 



23,957,311



23,933,033

 

 

 

 

 

 

 

 

 









Basic loss per share

 

$

(0.06

)

 

$

(0.05

)
$ (0.13 )
$ (0.15 )

Diluted loss per share

 

$

(0.06

)

 

$

(0.05

)


$ (0.13 )
$ (0.15 )

 

 

 

 

 

 

 

 

 









Comprehensive loss:

 

 

 

 

 

 

 

 









Net loss

 

$

(1,351

)

 

$

(1,248

)
$ (3,202 )
$ (3,472 )

Unrealized loss on available-for-sale securities, net of tax

 

 

(31

)

 

 



(17 )

(2
)

Change in foreign currency translation adjustment

 

 

(7

)

 

 

(22

)

(3
)

(45
)

Comprehensive loss

 

$

(1,389

)

 

$

(1,270

)


$ (3,222 )
$ (3,519 )

 

See accompanying notes

 

 

CLEARONE, INC.

(Dollars in thousands, except per share amounts)

 

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(3,202

)

 

$

(3,472

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

709

 

 

 

2,390

 

Amortization of right-of-use assets

 

 

306

 

 

 

449

 

Share-based compensation expense

 

 

80

 

 

 

90

 

Change of inventory to net realizable value

 

 

105

 

 

 

221

 

    Gain recognized on Paycheck Protection Plan Loan forgiveness




(1,528 )
    Gain (loss) on disposal of assets and sale of marketable securities

(12 )

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Receivables

 

 

(271

)

 

 

868

Legal settlement receivable



55,000



Inventories

 

 

29

 

 

 

710

 

Prepaid expenses and other assets

 

 

4,035

 

 

2,051

Accounts payable

 

 

475

 

 

(3,336

)

Accrued liabilities

 

 

(448

)

 

 

(54

)

Income taxes receivable

 

 

(5,310

)

 

 

Deferred product revenue

 

 

(25

)

 

 

19

Operating lease liabilities

 

 

(328

)

 

 

(468

)

Net cash provided by (used in) operating activities

 

 

51,143

 

 

(2,060

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(372

)

 

 

(17

)

Purchase of intangibles

 

 

(111

)

 

 

(93

)

Capitalized patent defense costs

 

 

 

 

(642

)

Proceeds from maturities and sales of marketable securities

 

 

3,094

 

 

 

3,008

 

Purchases of marketable securities

(9,389 )


Net cash provided by (used in) investing activities

 

 

(6,778

)

 

 

2,256

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Dividend payment

(28,979 )


Net proceeds from equity-based compensation programs 

 

 

4

 

 

 

3

 

Paycheck Protection Program loan refund upon full forgiveness net of loan payments






768

Principal payments of debt



(2,675 )

(540 )

Net cash provided by (used in) financing activities

 

 

(31,650

)

 

 

231

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(5

)

 

 

(48

)

 

 

 

 

 

 

 

 

 

Net increase in cash and cash equivalents 

 

 

12,710

 

 

379

Cash and cash equivalents at the beginning of the period

 

 

984

 

 

 

1,071

 

Cash and cash equivalents at the end of the period 

 

$

13,694

 

$

1,450

 

  

See accompanying notes

 

 

 CLEARONE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands, except per share amounts)

 

The following is a summary of supplemental cash flow activities:

 

 

 

Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

Cash paid for income taxes

 

$

6,650

 

 

$

68

 

Cash paid for interest 311 140

 

See accompanying notes

 


CLEARONE, INC.

(Unaudited - Dollars in thousands, except per share amounts)

  

1. Business Description, Basis of Presentation and Significant Accounting Policies

 

Business Description:

 

ClearOne, Inc., together with its subsidiaries (collectively, “ClearOne” or the “Company”), is a global market leader enabling conferencing, collaboration, and AV streaming solutions for voice and visual communications. The performance and simplicity of our advanced, comprehensive solutions offer unprecedented levels of functionality, reliability and scalability.

 

Basis of Presentation:

 

The fiscal year for ClearOne is the twelve months ending on December 31. The condensed consolidated financial statements include the accounts of ClearOne and its subsidiaries. All significant inter-company accounts and transactions have been eliminated. 

 

These accompanying interim unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and are not audited. Certain information and footnote disclosures that are usually included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been either condensed or omitted in accordance with SEC rules and regulations. The accompanying condensed consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of September 30, 2023 and December 31, 2022, the results of operations for the three and nine months ended September 30, 2023 and 2022, and the cash flows for the nine months ended September 30, 2023 and 2022. The results of operations for the three and nine months ended September 30, 2023 and 2022 are not necessarily indicative of the results for a full-year period. These interim unaudited condensed consolidated financial statements should be read in conjunction with the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC. 

 

Significant Accounting Policies:

 

The significant accounting policies were described in Note 1 to the audited consolidated financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2022. There have been no changes to these policies during the quarter ended September 30, 2023 that are of significance or potential significance to the Company.


Recent accounting pronouncements: 


In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments - Credit Losses (Topic 326). The new standard amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities. In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842), which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments will be effective for the Company for interim and annual periods in fiscal years beginning after December 15, 2022. CECL estimates of expected credit losses on trade receivables over their life will be required to be recorded at inception, based on historical information, current conditions, and reasonable and supportable forecasts. The Company adopted the standard in its first quarter of 2023. There was no material impact on the results of operations.

 

The Company has determined that recently issued accounting standards, other than the above discussed, will not have a material impact on its consolidated financial position, results of operations or cash flows.

 

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

  

Liquidity:

 

As of September 30, 2023, our cash and cash equivalents were approximately $13,694 compared to $984 as of December 31, 2022. Our working capital was $36,746 as of September 30, 2023. Net cash provided by operating activities was $51,143 for the nine months ended September 30, 2023, an increase of $53,203 compared to $2,060 of cash used in operating activities for the nine months ended September 30, 2022.  The Company believes, although there can be no assurance, that the current cash position and effective management of working capital, will provide the liquidity needed to meet our operating needs through at least November 8, 2024. The Company also believes that its strong portfolio of intellectual property and its solid brand equity in the market will enable it to raise additional capital if and when needed to meet its short and long-term financing needs; however, there can be no assurance that, if needed, the Company will be successful in obtaining the necessary funds through equity or debt financing on favorable terms or at all. If the Company needs additional capital and is unable to secure financing, it may be required to further reduce expenses, or delay product development and enhancement.

 

2. Revenue Information

 

The following table disaggregates the Company’s revenue into primary product groups:

 

 

 

Three months ended September 30,

 


Nine months ended September 30,

 

 

2023

 

 

2022

 


2023


2022

Audio conferencing

 

$

1,867

 

 

$

3,201

 


$ 6,484

$ 9,655

Microphones

 

 

2,355

 

 

 

2,475

 



6,239


8,525

Video products

 

 

667

 

 

 

588

 



1,827


3,004

 

 

$

4,889

 

 

$

6,264

 


$ 14,550


$ 21,184

 

The following table disaggregates the Company’s revenue into major regions: 


 

 

Three months ended September 30,

 


Nine months ended September 30,

 

 

2023

 

 

2022

 


2023

2022

North and South America 

 

$

2,400

 

 

$

3,251

 


$ 7,353

$ 10,211

Asia Pacific (includes Middle East, India and Australia)

 

 

2,058

 

 

 

2,018

 



5,426



6,560

Europe and Africa

 

 

431

 

 

 

995

 



1,771



4,413

 

 

$

4,889

 

 

$

6,264

 


$ 14,550


$ 21,184

 

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)


3. Loss Per Share

 

Loss per common share is computed based on the weighted-average number of common shares outstanding and, when appropriate, dilutive potential common stock outstanding during the period. Stock options, warrants and the convertible portion of senior convertible notes are considered to be potential common stock. The computation of diluted earnings (loss) per share does not assume exercise or conversion of securities that would have an anti-dilutive effect. 

 

Basic earnings (loss) per common share is the amount of net earnings (loss) for the period available to each weighted-average share of common stock outstanding during the reporting period. Diluted earnings (loss) per common share is the amount of earnings (loss) for the period available to each weighted-average share of common stock outstanding during the reporting period and to each share of potential common stock outstanding during the period, unless inclusion of potential common stock would have an anti-dilutive effect. 


The following table sets forth the computation of basic and diluted earnings (loss) per common share:

 

 


Three months ended September 30,

Nine months ended September 30,

 


2023

2022

2023


2022

Numerator:

















Net loss


$ (1,351 )
$ (1,248 )
$ (3,202 )
$ (3,472)

Denominator:

















Basic weighted average shares outstanding



23,960,313


23,952,555


23,957,311


23,933,033

Dilutive common stock equivalents using treasury stock method













Diluted weighted average shares outstanding



23,960,313


23,952,555


23,957,311


23,933,033

 

















Basic loss per common share


$ (0.06 )
$ (0.05 )
$ (0.13 )
$ (0.15)

Diluted loss per common share


$ (0.06 )
$ (0.05 )
$ (0.13 )
$ (0.15)

 

















Weighted average options, warrants and convertible portion of senior convertible notes outstanding



6,294,994


6,694,433


6,316,137



6,896,803

Anti-dilutive options, warrants and convertible portion of senior convertible notes not included in the computation



6,294,994


6,694,433


6,316,137


6,896,803

 


UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

 

4. Marketable Securities

 

The Company has classified its marketable securities as available-for-sale securities. These securities are carried at estimated fair value with unrealized holding gains and losses included in accumulated other comprehensive loss in stockholders’ equity until realized. Gains and losses on marketable security transactions are reported on the specific-identification method. Dividend and interest income are recognized when earned.

 

The amortized cost, gross unrealized holding gains, gross unrealized holding losses, and fair value for available-for-sale securities by major security type and class of securities as of September 30, 2023 were as follows:


 

 

Amortized cost

 

 

Gross unrealized holding gains

 

 

Gross unrealized holding losses

 

 

Estimated fair value

 

September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury securities
$ 3,281

$

$ (3 )
$ 3,278
Mutual funds

1,169


2




1,171
Certificates of deposit

859








859

Corporate bonds and notes

 

$

989

 

 

$

 

 

$

(16

)

 

$

973

 

Total available-for-sale securities

 

$

6,298

 

 

$

2

 

 

$

(19

)

 

$

6,281

 

 

There were no available-for sale securities as of December 31, 2022.


 

 

Amortized cost

 

 

Estimated fair value

 

Due within one year

 

$

5,715

 

 

$

5,698

 

Due after one year through five years

 

 

583

 

 

 

583

 

Due after five years

 

 

 

 

 

 

Total available-for-sale securities

 

$

6,298

 

 

$

6,281

 

 

 

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)


Debt securities in an unrealized loss position as of September 30, 2023 were not deemed impaired at acquisition and subsequent declines in fair value are not deemed attributed to declines in credit quality. Management believes that it is more likely than not that the securities will receive a full recovery of par value, although there can be no assurance that such recovery will occur. The available-for-sale marketable securities with continuous gross unrealized loss position for less than 12 months and 12 months or greater and their related fair values were as follows: 

 

 

 

Less than 12 months

 

 

More than 12 months

 

 

Total

 

 

 

Estimated fair value

 

 

Gross unrealized holding losses

 

 

Estimated fair value

 

 

Gross unrealized holding losses

 

 

Estimated fair value

 

 

Gross unrealized holding losses

 

As of September 30, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

US Treasury securities

 

$

3,278

 

 

$

(3

)

 

$

 

 

$

 

 

$

3,278

 

 

$

(3

)

Corporate bonds and notes

 

 

973

 

 

 

(16

)

 

 

 

 

 

 

 

 

973

 

 

 

(16

)

Total

 

$

4,251

 

 

$

(19

)

 

$

 

 

$

 

 

$

4,251

 

 

$

(19

)


5. Intangible Assets

 

Intangible assets as of September 30, 2023 and December 31, 2022 consisted of the following:

 

 

 

Estimated useful lives (years)

 

 

September 30, 2023

 

 

December 31, 2022

 

Tradename

 

 5

to

7

 

 

$

555

 

 

$

555

 

Patents and technological know-how

 

10

to

20

 

 

 

7,164

 

 

 

7,053

 

Proprietary software

 

 3

to

15

 

 

 

2,981

 

 

 

2,981

 

Other

 

 3

to

5

 

 

 

323

 

 

 

323

 

Total intangible assets

 

 

 

 

 

 

 

11,023

 

 

 

10,912

 

Accumulated amortization

 

 

 

 

 

 

 

(9,229

)

 

 

(8,841

)

Total intangible assets, net

 

 

 

 

 

 

$

1,794

 

 

$

2,071

 

 

The amortization of intangible assets for the three and nine months ended September 30, 2023 and 2022 was as follows: 

 

 


Three months ended September 30,


Nine months ended September 30,

 


2023

2022

2023


2022

Amortization of intangible assets


$ 141

$ 686

$ 388

$ 2,038

 

The estimated future amortization expense of intangible assets is as follows:

 

Years ending December 31,

 

Amount

 

2023 (Remainder)

 

$

129

 

2024

 

 

255

 

2025

 

 

194

 

2026

 

 

193

 

2027

 

 

63

 

Thereafter

 

 

960

 

Total

 

$  

1,794

 

 

 

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

 

6. Inventories

 

Inventories, net of reserves, as of September 30, 2023 and December 31, 2022 consisted of the following:  

 

 

 

September 30, 2023

 

 

December 31, 2022

 

Current:

 

 

 

 

 

 

 

 

Raw materials

 

$

3,210

 

 

$

4,499

 

Finished goods

 

 

5,454

 

 

 

4,462

 

 

 

$

8,664

 

 

$

8,961

 

 

 

 

 

 

 

 

 

 

Long-term:

 

 

 

 

 

 

 

 

Raw materials

 

$

1,302

 

 

$

1,068

 

Finished goods

 

 

1,568

 

 

 

1,639

 

 

 

$

2,870

 

 

$

2,707

 

  

Long-term inventory represents inventory held in excess of our current (next 12 months) requirements based on our recent sales and forecasted level of sales. We expect to sell the above inventory, net of reserves, at or above the stated cost and believe that no loss will be incurred on its sale, although there can be no assurance of the timing or amount of any sales. 

 

Net loss incurred on valuation of inventory at lower of cost or market value and write-off of obsolete inventory for three and nine months ended September 30, 2023 and 2022 was as follows:   

 

 


Three months ended September 30,


Nine months ended September 30,

 


2023

2022

2023


2022

Net loss incurred on valuation of inventory at lower of cost or market value and write-off of obsolete inventory


$ 3

$ 194

$ 105

$ 221

 

7. Leases

 

Rent expense is recognized on a straight-line basis over the period of the lease taking into account future rent escalation and holiday periods. 

 

Rent expense for three and nine months ended September 30, 2023 and 2022 was as follows: 

 

 

 

Three months ended September 30,


 

Nine months ended September 30,

 

 

2023

 

 

2022


 

2023


2022

Rent expense

 

$

110

 

 

$

169


 

$ 369

$ 518

The Company occupies a 1,350 square-foot facility in Gainesville, Florida under the terms of an operating lease expiring in February 2028The Gainesville facility is used primarily to support the Company's research and development activities. 

 

The Company occupies a 9,402 square-foot facility in Salt Lake City, Utah under the terms of an operating lease expiring in February 2028. The facility supports the Company's principal administrative, sales, marketing, customer support, and research and product development activities. 

 


UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)


The Company occupies a 6,175 square-foot facility in Chennai, India under the terms of an operating lease expiring in August 2024. This facility supports the Company's administrative, marketing, customer support, and research and product development activities. The Company is planning to renew the lease.

 

The Company occupies a 40,000 square-foot warehouse in Salt Lake City, Utah under the terms of an operating lease expiring in April 2025, which serves as the Company's primary inventory fulfillment center.  


Supplemental cash flow information related to leases was as follows: 

 

 

 

Nine months ended September 30,

 

 

 

2023

 

 

2022

 

Cash paid for amounts included in the measurement of lease liabilities

 



 

 



 

Operating cash flows from operating leases
$ 378
$ 531
Right-of-use assets obtained in exchange for lease obligations:







Operating leases
$ 341

$

 

Supplemental balance sheet information related to leases was as follows:

 

 

 

September 30, 2023

 

 

December 31, 2022

 

Operating lease right-of-use assets

 

$

 1,081

 

 

$

 1,047

 


 








Current portion of operating lease liabilities, included in accrued liabilities
$ 390

$ 641

Operating lease liabilities, net of current portion

 

 

755

 

 

 

492

 

Total operating lease liabilities

 

$

1,145

 

 

$

1,133

 

 

 

 

 

 

 

 

 

 

Weighted average remaining lease term for operating leases (in years) 

3.56


2.12
Weighted average discount rate for operating leases

6.43 %

5.93 %

  

The following represents maturities of operating lease liabilities as of September 30, 2023:

 

Years ending December 31,

 

 

 

 

2023 (Remainder)

 

$

114

 

2024

 

 

439

 

2025

 

 

272

 

2026

 

 

210

 

2027

 

 

216

 

Thereafter

38

Total lease payments

 

 

1,289

 

Less: Imputed interest

 

 

(144

)

Total

 

$

1,145

 


 

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited - Dollars in thousands, except per share amounts)

 

8. Shareholders' Equity

 

 

 

Three months ended September 30,

 


Nine Months Ended September 30,

 

 

2023

 

 

2022

 


2023

2022

Common stock and additional paid-in capital

 

 

 

 

 

 

 

 









Balance, beginning of period

 

$

46,003

 

 

$

74,885

 


$ 74,934

$ 72,817

Dividends paid

 


 


 


(28,979 )

Issuance of common stock and warrants, net

 








2,000

Share-based compensation expense

 

 

33

 

 

 

24

 



80


90

Proceeds from employee stock purchase plan

 

 

3

 

 

 

1

 



4


3

Balance, end of period

 

$

46,039

 

 

$

74,910

 


$ 46,039

$ 74,910

 

 

 

 

 

 

 

 

 









Accumulated other comprehensive loss

 

 

 

 

 

 

 

 









Balance, beginning of period

 

$

(270

)

 

$

(266

)


$ (288 )
$ (241 )

Unrealized loss on available-for-sale securities, net of tax 

 

 

(31

)

 

 



(17 )

(2 )

Foreign currency translation adjustment

 

 

(7

)

 

 

(22

)

(3 )

(45
)

Balance, end of period

 

$

(308

)

 

$

(288

)


$ (308 )
$ (288
)

 

 

 

 

 

 

 

 

 









Accumulated deficit 

 

 

 

 

 

 

 

 









Balance, beginning of period

 

$

(2,367

)

 

$

(23,296

)
$ (516 )
$ (21,072 )

Net loss

 

 

(1,351

)

 

 

(1,248

)



(3,202
)

(3,472
)

Balance, end of period

 

$

(3,718

)

 

$

(24,544

)


$ (3,718 )
$ (24,544
)

 

 

 

 

 

 

 

 

 









Total shareholders' equity

 

$

42,013

 

 

$

50,078

 


$ 42,013

$ 50,078

 

Issue of Common Stock and Warrants


On September 12, 2021, the Company entered into a securities purchase agreement with certain purchasers named therein, pursuant to which the Company issued 3,623,189 shares of the Company's common stock, par value $0.001 per share at an offering price of $2.76 per share. The Company received gross proceeds of approximately $10,000 and net proceeds of $9,288 after deducting placement agent fees and related offering expenses. In a concurring private placement the Company also issued to the same purchasers warrants exercisable for an aggregate of 3,623,189 shares of common stock at an exercise price of $2.76 per share. Each warrant became immediately exercisable and will expire on March 15, 2027.


On January 4, 2022, the Company entered into a Securities Purchase Agreement with Edward D. Bagley, an affiliate of the Company, pursuant to which the Company agreed to issue and sell, in a private placement 1,538,461 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share, at a purchase price of $1.30 per share of Common Stock. The consideration for the Shares is the cancellation and termination of Mr. Bagley’s outstanding bridge loan to the Company in the principal amount of $2,000 originally issued on July 2, 2021 and amended and restated on September 11, 2021. Mr. Bagley is an affiliate of the Company and the Company’s single largest stockholder.


Cash Dividend Distribution


On May 8, 2023, the Company announced that the Company’s Board of Directors had declared a special one-time cash dividend of $1.00 per share of the Company’s common stock or eligible warrants and paid $28,978 of cash dividends on May 31, 2023 to shareholders of record on May 22, 2023

Nasdaq Delisting Notification

On August 1, 2023, the Company received a letter (the “Notice”) from the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market (“Nasdaq”) informing management that because the closing bid price for the Company’s common stock listed on Nasdaq was below $1.00 for 30